Israel suspends EU role in peace process with Palestinians

JERUSALEM, Nov 29 (Reuters) - Israel said on Sunday it was
suspending contacts with European Union bodies involved in peace
efforts with the Palestinians after the bloc started requiring
the labelling of exports from Israeli settlements in the West
Bank.

Prime Minister Benjamin Netanyahu ordered the foreign
ministry to carry out "a reassessment of the involvement of EU
bodies in everything that is connected to the diplomatic process
with the Palestinians", a ministry statement said.

"Until completion of the reassessment, the Prime Minister
has ordered a suspension of diplomatic contacts with the EU and
its representatives in this matter."

EU officials played down the significance of the Israeli
move, saying it had been threatened in the past and that it was
only a suspension which could be lifted soon.

The EU published new guidelines on Nov. 11 for labelling
products made in Israeli settlements, a move Brussels said was
technical but which Israel branded "discriminatory" and damaging
to peace efforts with the Palestinians.

Drawn up over three years by the European Commission, the
guidelines mean Israeli producers must explicitly label farm
goods and other products that come from settlements built on
land occupied by Israel if they are sold in the European Union.

The EU's position is that the lands Israel has occupied
since the 1967 Middle East war - including the West Bank, East
Jerusalem and the Golan Heights - are not part of the
internationally recognised borders of Israel.

As such, goods from there cannot be labelled "Made in
Israel" and should be labelled as coming from settlements, which
the EU considers illegal under international law.

After the EU announcement, Netanyahu called it "hypocritical
and a double standard", saying the EU was not taking similar
steps in hundreds of territorial conflicts elsewhere in the
world.

"The European Union should be ashamed of itself," he said
while on an official visit in Washington earlier this month. "We
do not accept the fact that Europe is labelling the side being
attacked by terrorist acts."

FARMERS WORRIED

The development of settlements has been one of the obstacles
to negotiations between Israel and the Palestinians. U.S.-backed
peace talks stalled in April 2014.

"It's an indication of origin, not a warning label," the EU
ambassador to Israel, Lars Faaborg-Andersen, told Reuters after
the bloc's decision was announced.

Britain, Belgium and Denmark already affix labels to Israeli
goods, differentiating between those from Israel proper and
those, particularly fruit and vegetables, that come from the
Jordan Valley in the occupied West Bank.

Following the decision, all 28 EU member states will have to
apply the same labelling.

Israel's economy ministry estimated this would affect goods
worth about $50 million a year, including grapes and dates,
wine, poultry, honey, olive oil and cosmetics made from Dead Sea
minerals.

That is around a fifth of the $200-$300 million worth of
goods produced in settlements each year, but a drop in the ocean
next to the $30 billion of goods and services traded annually
between Israel and the European Union.

Israeli farmers and wine growers in the West Bank have
expressed worry about the impact on their business and some have
begun diversifying into markets in Russia and Asia to escape EU
rules.

In its statement, the Israeli foreign ministry said contacts
with individual EU countries - it named Germany, France and
Britain - would not be affected by Sunday's announcement.

A ministry official said Israel would cease assisting
EU-sponsored projects intended for the Palestinians, but no
specific instances or bodies were named.
(Additional reporting by Luke Baker, and Francesco Guarascio
and Robin Emmott in Brussels, writing by Ori Lewis,; Editing by
Mark Trevelyan, Richard Balmforth and Sanjeev Miglani)